US wholesale inflation rises to another record

US producer prices continued to rise last month, reaching their biggest annualized jump on record.

The inflationary trend in the United States is still very much alive and well.

The Producer Price Index (PPI), which measures the prices that companies receive for their goods and services, increased 8.6 percent in September compared to the same period last year. That’s the biggest jump in records going back to 2010.

But the annualized wholesale inflation rate measures current prices against an economy that is still struggling in September 2020.

On a month-over-month basis, producer prices increased only 0.5 percent in September. That was lower than many expected and the lowest month-over-month increase this year.

Prices for services helped hold off the main PPI figure, which rose just 0.2 percent in September from the previous month. That also marked the slowest monthly gain this year.

A large contraction in air travel prices amid a surge in the Delta variant of COVID-19 helped control prices for services last month.

Meanwhile, the big driver of the jump in wholesale inflation last month was energy prices, which are currently on the rise, thanks to global shortages of oil, natural gas and coal.

Final US energy demand in September increased 2.8 percent, accounting for 40 percent of the overall rise in producer prices.

At a more granular level, gasoline (gasoline) prices rose 3.9 percent last month.

If volatile food and energy are eliminated, so-called “basic” producer prices rose just 0.2 percent in September from the previous month, the smallest jump this year.

When producers of goods and providers of services are faced with higher prices, they often pass on those costs to consumers. On Wednesday, the U.S. Department of Labor reported that consumer prices rose 0.4 percent in September from the previous month and 5.4 percent in the past 12 months, matching a high of 13 years in annualized inflation reached in June and July.

Inflation has become a hallmark of the U.S. economic recovery from last year’s COVID lockdowns, fueled by a combination of stimulus-pumping demand, supply chain bottlenecks, and shortages of raw materials and labor.

On Wednesday, President Joe Biden announced that the largest port in the United States, The Port of Los Angeles, will operate 24 hours a day, 7 days a week to help eliminate bottlenecks and alleviate bottlenecks. supply chain constraints.

While a little inflation is a good thing for an economy because it incentivizes consumers to buy goods and services now, rather than sticking around in their wallets in the expectation that prices will fall, too much inflation can be deeply destructive if it triggers a surge. violent price. spiral.

The Federal Reserve has been adamant in its belief that the current inflationary pressures that have characterized the economic recovery from COVID-19 as “transitory.”

But on Wednesday, minutes from the Fed’s last policy-setting meeting in September said that while “staff continued to expect this year’s rise in inflation to be transitory,” that recent inflation indicates that ” supply were putting a greater amount of upward pressure on prices than previously anticipated. “

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